'I get paid £3,706 a year to heat my home – here's how'
03-02-2015
The Thomas family earn an income by heating their bungalow with 'green' devices. Are the Government payouts on renewables about to shrink?
Anne Thomas from North Kessock near Inverness gets paid for generating heat and electricity with solar panels, ground heat and a wind turbine Photo: All images © Stuart Nicol Photography 2014.
By Kate Palmer
Heating bills are falling. Increased competition and lower wholesale prices are trickling through to households, helped by a milder winter. Some people will have switched to a new, cheaper tariff, saving even more.
But the seriously committed householders are going further still: by using a range of Government subsidies they actually get paid to heat their home.
So far, 22,590 families are pocketing renewable heat payments, funded from £125m of taxpayer money, for running green heating systems such as heat pumps, biomass boilers and solar panels.
They earn hundreds – or even thousands – of pounds each year by generating heat with these devices.
Those tempted but who have yet to apply should do so before the scheme become less generous, experts warn. The Government has already cut its payments for electricity produced in the home via reductions to the “feed-in tariff”, and payments for heat could soon follow this downward track.
James Higgins is an energy policy specialist at Ecuity, a consultancy firm. He said: “Thankfully the Government has learnt from the boom and bust experience with feed-in tariffs, where unexpectedly high take-up meant they had to make rapid reductions in the rates.
“For renewable heat, the Government will slowly decrease the tariffs as take-up increases, so if you want the highest tariff, it is best to get in early.”
Yet just £5.7m of the pot has been claimed since the fund opened to domestic customers in April 2014, despite the promise of a generous payment for each unit of heat generated.
The low take-up suggests that the subsidy is yet another misguided Government green scheme. Telegraph Money has previously highlighted chaos surrounding the Government's flagship efficiency scheme, the Green Deal. In December, the fund exhausted £24m in just three days when people clambered to claim for home improvements.
Meanwhile, high upfront costs mean the renewable heat subsidy, which can be claimed alongside Green Deal finance, could exclude many households. Installing renewable heat from the ground, for example, costs around £15,000.
And as the price of oil has sunk from £75 a barrel in June to less than £40 in February 2015, so has the appeal of renewables.
How the scheme earns this family £3,706
The controversial scheme is working for some householders, including Anne and Steven Thomas, from North Kessock in Inverness, who receive £3,706 per year from renewable heat generated in their five-bedroom bungalow.
The couple installed a ground-source heat pump, which heats the home, and solar panels, which provide hot water, in April 2013.
They live in rural Scotland and previously relied on oil heating, which cost around £3,000 per year. Now their heating bills are zero – in fact, they’re paid thousands each year.
Mr and Mrs Thomas, who are in their 50s with three grown-up children, wanted to make their home carbon neutral and end their reliance on oil heating, which required a large tank in their garden. They moved into the property eight years ago from London, and had already installed a small wind turbine to provide electricity.
“I wanted the house to be good for the environment, whereas my husband Steven was more concerned that the numbers added up,” said Mrs Thomas, a speech and language therapist.
The ground-source heat pump cost around £11,000 to install and the solar panels £3,000. The pump extracts heat from two 150m (490ft) holes in the garden, and works on the basis that temperatures underground change more slowly than air temperatures. “The unit is not noisy at all. However, the installation work did cause some disruption to day-to-day life,” said Mrs Thomas.
The solar panels were fitted by their son, Matthew, who is a registered installer. “Lots of our neighbours have solar panels, so we asked around beforehand. The scheme is positive for people in our area,” Mrs Thomas said.
The money they receive comes mainly from the generous subsidies paid per kilowatt hour (kWh) for the heat generated by their ground-source pump (see below). They also receive payments of hundreds of pounds per year from subsidies linked to their solar heat generations through the panels on their roof.
The payments come via Ofgem every three months – a bit like an energy bill, only in reverse. Mrs Thomas said the payments they received were “rather a lot” but that they could be a lifeline for rural homes cut off from the gas or electricity network.
The payments will only continue for seven years. But if Mrs Thomas’s calculations are correct, that should deliver a total income of around £26,000, provided they use and generate the same level of energy. That would give them a return of nearly 100pc on their original £14,000 outlay.
Could it work for you?
Whether you live in a flat or a mansion, you have a pick of renewable measures that are eligible for heat subsidies.
Choose from solar thermal panels, biomass and heat pumps that are installed in the open or below ground. We have broken down the cost of each measure below, using official figures from the Department for Energy and Climate Change and the Energy Saving Trust, alongside how much a typical four-bedroom semi detached house would earn.
Our figures exclude the extra savings you would receive from your household energy bills, which depend on how much heat you use and your home type.
To apply, book a Green Deal assessment to assess the energy efficiency of your home. Once renewable heat has been installed, you have one year to apply for payments online at domesticrhi.ofgem.gov.uk/apply.
The measures are not cheap to install and may require planning permission. Home owners in Scotland may be eligible for a zero-interest loan or grant to help with the upfront costs, from Home Energy Scotland.
But once installed, households will receive a few pence per kWh of heat they use, for seven years after their first payment. You can use an official calculator to work out the return in your home, available online at www.gov.uk/renewable-heat-incentive-calculator.
For example, a four-bedroom Fifties detached house with loft and cavity wall insulation and an old (pre-2005) boiler could earn £200 a year (£1,400 over the seven-year period) by installing solar thermal panels. Or installing biomass would earn £1,900 per year and £13,300 over the seven-year period. A ground-source heat pump would earn £2,200 over the year, £15,400 over seven years.
A top-floor, two-bedroom flat built in the 2000s with loft insulation and a cavity wall, heated with storage heaters, could earn £240 a year from air-source heat pumps, £580 a year from biomass or £190 from solar thermal panels.
A three-bedroom mid-terrace Victorian property with solid brick walls and an old oil boiler could earn £190 a year from solar panels, £580 from biomass or £240 with an air-source heat pump.
Which heat source is right for you?
Air source heat pumps: These have proved the most popular measure, with 8,000 households receiving payments for this type of pump. Brian Horne, of the Energy Saving Trust, said: "These are small and cheap to install. They can be attached to the ground or property, so are suitable for flats."
Earn: 7.3p per kWh
Installation cost: £7,000 to £11,000
Income over seven years: £4,550
Biomass: A wood burner, which uses pellets, chips or logs to heat a room or boiler, is the least popular option but generates the biggest subsidy – the Government has paid £2.7m to householders for the device out of a total £5.7m. "You'll need space to put the boiler, which is bigger than an ordinary boiler, and access for the fuel – usually logs – to be delivered," said Mr Horne.
Earn: 10.98p per kWh
Installation cost: £4,300 for the stove and £9,000 to £21,000 for the boiler
Income over seven years: £11,200
Ground source heat pumps: A ground source heat pump "is more expensive than the air pump to install, but is more efficient because it draws heat from the ground, especially in winter."
Earn: 18.8p per kWh
Installation cost: £11,000 to £15,000
Income over seven years: £13,300
Solar water heating: The panels on your roof heat water throughout the year. "Of course, you need roof space, as well as somewhere to put the hot water tank. There are millions of houses suitable for installing panels," said Mr Horne.
Earn: 19.2p per kWh
Installation cost: £3,000 to £5,000
Income over seven years: £1,330
- Put a question to our experts: moneyexpert@telegraph.co.uk